2019 (11) TMI 1845 - AT - Income Tax

Addition u/s 68 - bogus LTCG - As per AO LTCG claimed was an accommodation entry - HELD THAT - We note that learned CIT(A) has given a finding that there is no economic or financial basis as to how the shares of a little known company jumping manifold in no time giving the assessee a windfall of capital gain. The finding of CIT(A) and his reasoning are fully in conformity with the discussion in the case of Sanjay Bimalchand Jain 2017 (5) TMI 983 - BOMBAY HIGH COURT Assessee s appeal stands dismissed.

Summary

The appeal in this case pertains to the assessment year 2014-15 and concerns the addition of Long Term Capital Gain (LTCG) and unexplained expenditure by the Assessing Officer (AO). The core issues considered are the genuineness of the LTCG claimed by the assessee and the justification for the addition of unexplained expenditure.The main legal questions addressed in this judgment are:1. Whether the LTCG claimed by the assessee is genuine, considering the transaction details and surrounding circumstances?2. Whether the addition of unexplained expenditure by the AO is justified based on the evidence presented by the assessee?The Court analyzed the facts and arguments presented by both parties. The Assessing Officer added the LTCG amount to the assessee's income under section 68, considering it as an accommodation entry. The Commissioner of Income Tax (Appeals) upheld this decision after detailed consideration of the case.The Court considered the principles established by the Hon'ble Supreme Court in cases such as Sumati Dayal and Durga Prasad More, emphasizing the importance of the substance of transactions over their form. The timing of share purchase, dematerialization, and sale was deemed crucial, especially in relation to the significant increase in share prices. The Court highlighted the lack of economic or financial basis for the substantial increase in share value, raising doubts about the genuineness of the LTCG claimed by the assessee.Additionally, the Court referred to the case of Sanjay Bimalchand Jain, where a similar issue of dubious share transactions was adjudicated. The Court found similarities between the facts of that case and the present case, reinforcing the conclusion that the LTCG claimed by the assessee was not genuine.In conclusion, the Court upheld the decision of the Commissioner of Income Tax (Appeals) to confirm the addition of LTCG and unexplained expenditure, finding no infirmity in the reasoning provided. The appeal by the assessee was dismissed, and the order was pronounced on 21.11.2019.This judgment establishes the principle that the genuineness of transactions, especially in the context of capital gains, must be assessed based on the substance of the transaction and surrounding circumstances rather than mere documentation. It also underscores the importance of providing a valid economic or financial basis for significant financial gains to avoid suspicion of dubious transactions.